Investors must decide if they are cautious or adventurous, and buy funds that fit their long-term aims, says Alicia Wyllie

But investors who follow the latest fad may end up in unsuitable funds.

Ian Millward of RJ Temple, an independent adviser, says: “Investors tend to buy whatever is flavour of the month and end up with funds that don’t match their risk profile and don’t achieve their long-term aims.

“The technology bubble is a classic example. People piled into high-risk funds on the back of stunning performance and ended up losing a fortune.”

To avoid falling into this trap, you need to build a balanced portfolio with a broad spread of funds. Investors who gambled all their money on equity Isas three years ago have suffered declines of about 40%, while those who mixed bond and equity funds have pared their losses to about 22%.